Self-Employed? Here’s How a Bank Statement Loan Can Help You Buy a Home
Many self-employed buyers earn strong income but struggle to qualify for a traditional mortgage. This is often not because they cannot afford a home, but because their tax returns do not show the full picture of their earnings. Business owners commonly take legitimate write-offs, which can lower taxable income on paper. As a result, qualifying for a conventional loan can feel limiting.
Who Is Considered Self-Employed?
Self-employed income takes many different forms. You are considered self-employed if you run your own business, work as an independent contractor, or earn income outside a traditional W-2 structure. This includes small business owners, freelancers, consultants, Realtors, creative professionals, gig-economy workers, and anyone with fluctuating monthly income or multiple income streams.
If you fall into any of these categories, your tax returns may not reflect your actual cash flow. This is where a bank statement loan may be helpful.
What Is a Bank Statement Loan?
A bank statement loan is an alternative loan option offered through non-QM lenders, which are private or specialty financial institutions. Instead of verifying income with W-2s or tax returns, the lender reviews your recent bank statements to understand how your income flows into your accounts over time.
This method can make qualifying more realistic for buyers who have strong deposits but do not fit into traditional mortgage guidelines. Lenders typically review 12 to 24 months of statements, average your deposits, and calculate qualifying income based on that pattern.
Buyers often consider this type of loan when they have substantial write-offs, recently increased business revenue, or income that varies month to month.
Why Bank Statement Loans Are Priced Differently
Bank statement loans are usually funded by non-QM or private lenders. Because these loans fall outside Fannie Mae and Freddie Mac guidelines, lenders take on more risk and must review documentation manually. The additional risk and underwriting work are part of the reason interest rates for bank statement loans are typically higher than conventional loans.
These loans are not inherently better or worse. They simply offer a different qualification method for buyers whose income is not easily documented through traditional means.
Why Your Bank Statement Loan Rate May Not Drop When Conventional Rates Do
It is very common for self-employed buyers to notice that conventional mortgage rates have dropped, while their own rate on a bank statement loan has not changed. This is completely normal.
Conventional mortgage rates move daily based on the bond market, inflation reports, and federal economic indicators.
Bank statement loan rates do not follow those same patterns.
Rates for non-QM loans are influenced by:
• private investor demand
• risk assessments
• documentation requirements
• market conditions that affect non-QM lending, not the bond market
Because these are private lending products, the pricing structure is different from a traditional conventional loan. This is why someone with a bank statement loan might not see the same rate drops they see in the news.
To take advantage of lower conventional rates, borrowers typically need to refinance into a conventional loan once they meet the documentation requirements.
Can You Refinance to a Conventional Loan Later?
Yes. Many buyers use a bank statement loan as a temporary solution. Once you close escrow and own your home, you may be able to refinance into a conventional loan when your tax returns, bank statements, or business documentation support it.
Some buyers are ready in six to twelve months, while others need more time depending on how their income is reported. Speaking to your lender early can help you understand the timeline and what documentation may be needed in the future.
Is a Bank Statement Loan the Right Fit?
A bank statement loan can be a helpful option for buyers who have strong income but do not qualify under traditional guidelines. It provides a path forward for self-employed clients whose financial picture cannot be fully represented through W-2s and tax returns.
Understanding your loan options is an important part of the homebuying process. If you would like guidance, Josh and I are here to help you navigate your choices. We can introduce you to a trusted lenders who can provide tailored insight and answer any questions about financing.
Contact us HERE or give us a call at (424) 212-3859.
Best regards,
Lindsay Woolf | CA DRE #02236711
Josh Woolf | CA DRE #02252408
Circa Properties | CA DRE #02182130
Disclaimer: The information in this blog post is provided for general informational purposes only and does not constitute legal, financial, or lending advice. Real estate transactions and loan programs can vary based on individual circumstances and local regulations. For guidance related to your specific situation, please consult the appropriate licensed professional.
